Microsoft buys stake in Nook, college textbook business

Microsoft has invested $300 million in Barnes and Noble.

Microsoft is set to invest $300 million in Barnes and Noble's Nook business, Microsoft announced Monday. With that investment, Microsoft will have a 17.6 percent stake in a newly formed subsidiary that will handle B&N's digital and college bookstore businesses, and the partnership will result in a Nook application for Windows 8.

B&N announced in January that it was exploring a "strategic separation" of its digital business. The formation of Newco, the subsidiary that will contain the company's digital and college textbook businesses, could be a first step toward spinning off its digital business entirely.

Representatives for both companies expressed enthusiasm for using the Windows 8 Nook application. Andy Lees, president at Microsoft, said the app will "accelerate e-reading innovation across a broad range of Windows devices," while William Lynch, CEO of B&N, said the partnership will "bring world-class digital reading technologies and content to the Windows platform."

It's worth noting that there is already a Nook for PC app (as well as apps for Android, iOS, and Mac); this suggests that the Nook app may have a far broader range of functionality than just being a vector for e-reading. That the new subsidiary also includes B&N's textbook business may indicate that Microsoft and B&N are looking to compete with Apple in its recent push in the e-textbook market.

As a result of this partnership, Microsoft and B&N have settled their patent disputes. Going forward, B&N and Newco will have a royalty-bearing license under Microsoft's patents for its Nook e-readers and tablets.

I guess they skirted around B&N's refusal to pay them royalties for bogus android patents...

Bogus, and yet a preliminary ruling went against B&N, and every other maker (save Motorola) has cross-licensed. Seems there are very few people who aren't "The Internet" who thinks they're clearly bogus...

This adds a delicious twist to the fact that the NOOK runs on ANDROID and that MSFT has a current lawsuit against B&N over their use of ANDROID on the NOOK. And that B&N was one of only a few companies that are resisting paying "royalties/blackmail" to MSFT for using ANDROID.

Maybe MSFT was afraid that B&N's refusal to pay MSFT "royalties" for the usage of ANDROID might expose the possibility that the emperor is not wearing any clothes?

Just sayin' - as a bottom line - that could turn out to be the conclusion of analysts a few years from now.

I love my kindle, I have a mac and iphone but I am really happy to hear about this. I hope MS/B&N put some fire to Amazon, Apple and the other publishers. I wish things were a little easier to port, but competition based on technology and price is a win for us, sooner rather than later. Beats the hell out of relying on the courts (they are more likely to erect trade barriers and protect large companies than protect consumers).

What did B&N had on MS that was worth $300M? As long as I know MS was the one suing, in the worst case for them, they were going to lose and nothing more. Were their patents on danger of being invalidated?

It would be nice to see Nook have some real money behind it. I'm a big user of the Kindle app on my Samsung tablet, and I've bought 50+ books from Amazon for it, but the actual experience of reading Kindle books is pretty piss-poor. I don't know how much of that is due to the .mobi format that Amazon based their work on and how much is due to a lack of effort on the publishers' part, but I know that reading O'Reilly books in .epub format with Aldiko is a much, much better experience.

Given that Nook uses .epub, I'd be willing to give them a try and see if their books are better formatted.

I guess they skirted around B&N's refusal to pay them royalties for bogus android patents...

Bogus, and yet a preliminary ruling went against B&N, and every other maker (save Motorola) has cross-licensed. Seems there are very few people who aren't "The Internet" who thinks they're clearly bogus...

I think perhaps MS thinks it has something already and didn't want to endanger that. Lets say B&N got a few patents invalidated that means MS might have to go back and go through the patent claims against all other manufacturers. They have never dared go up against Google which to me would be the most direct approach.

I'm surprised the Nook business is worth over 1.5b. This should serve as a nice example for other Android vendors being sued by MSFT; just ignore MSFT and eventually they will throw money at you to settle.

Quote:

Companies Microsoft cooperates with seem to have a severly shortened life expectancy

This adds a delicious twist to the fact that the NOOK runs on ANDROID and that MSFT has a current lawsuit against B&N over their use of ANDROID on the NOOK. And that B&N was one of only a few companies that are resisting paying "royalties/blackmail" to MSFT for using ANDROID.

Maybe MSFT was afraid that B&N's refusal to pay MSFT "royalties" for the usage of ANDROID might expose the possibility that the emperor is not wearing any clothes?

Just sayin' - as a bottom line - that could turn out to be the conclusion of analysts a few years from now.

As part of the deal, B&N and Microsoft have settled their patent litigation, with the result that Microsoft will receive royalties for its intellectual property. According to the press release:

“Moving forward, Barnes & Noble and Newco will have a royalty-bearing license under Microsoft’s patents for its NOOK eReader and Tablet products...”

This adds a delicious twist to the fact that the NOOK runs on ANDROID and that MSFT has a current lawsuit against B&N over their use of ANDROID on the NOOK. And that B&N was one of only a few companies that are resisting paying "royalties/blackmail" to MSFT for using ANDROID.

Maybe MSFT was afraid that B&N's refusal to pay MSFT "royalties" for the usage of ANDROID might expose the possibility that the emperor is not wearing any clothes?

Just sayin' - as a bottom line - that could turn out to be the conclusion of analysts a few years from now.

It's like I was playing an old Pokémon game where all the proper nouns are captialized for no reason...

This adds a delicious twist to the fact that the NOOK runs on ANDROID and that MSFT has a current lawsuit against B&N over their use of ANDROID on the NOOK. And that B&N was one of only a few companies that are resisting paying "royalties/blackmail" to MSFT for using ANDROID.

Maybe MSFT was afraid that B&N's refusal to pay MSFT "royalties" for the usage of ANDROID might expose the possibility that the emperor is not wearing any clothes?

Just sayin' - as a bottom line - that could turn out to be the conclusion of analysts a few years from now.

It's like I was playing an old Pokémon game where all the proper nouns are captialized for no reason...

THAT sentiment IS quite right, those games were REALLY awesome, not ANNOYING.

I dont get how people come to the conclusion that B&N is in trouble, when they just resloved a major (and expensive for a book store) litigation issue, and got $300 million and the support of a huge software firm to support their goods.

We have Kindles and Nooks in our family. Pretty much everyone prefers the Nook. We were afraid that B&N was going to walk away from the whole eReader issues by only supporting independent hardware companies, which really would be the kiss of death against Amazon.

What did B&N had on MS that was worth $300M? As long as I know MS was the one suing, in the worst case for them, they were going to lose and nothing more. Were their patents on danger of being invalidated?

They turned a patent case that could have turned into just another licensing deal into a foot in the door into the publishing industry in a PARTNERSHIP that promotes competition. Everyone misses the fact that Microsoft is doing everything it can to build synergistic relationships which are better for everyone including customers including people who hate MS and don't use B&N's device or services. Simply because MS' actions are going to create stronger competition for apple and amazon everyone benefits.I hate the way people want to jump onto this negativity bandwagon.

Ask yourself why has B&N been the only company that didn't settle the patents case out of court? Samsung is a big company that would have had no problem putting up the legal fees if they saw it being winnable. They settled for what 15$ for every device!!! Would they have done that if it was a legal case they could have won?

I guess they skirted around B&N's refusal to pay them royalties for bogus android patents...

Bogus, and yet a preliminary ruling went against B&N, and every other maker (save Motorola) has cross-licensed. Seems there are very few people who aren't "The Internet" who thinks they're clearly [not] bogus...

It's not just anonymous Internet trolls who think this. In his book, "Launching the Innovation Renaissance", famous economist Alex Tabarrok cited this type of software patent as a destructive agent that blocks innovation and competition. Lots of other famous, credible people (John Carmack) have expressed similar ideas. In fact, I can't think of a big economist or policy expert or technology expert who is speaking up in defense of these types of patents.

The best justification that I've heard is that Microsoft has been able to win their case in the legal system, who supposedly knows more than we do. But no one can give a plain english or close to plain english justification of why this makes sense. I've read the full patents in question and I don't see a justification.

This seems like good news for B&N and good news for the ebook industry. B&N is Amazon's only real competitor in the ebook space, but both their retail stores and Nook business have been bleeding. Having the support of Microsoft/implicit ability to now be able to take those losses, at least on the ebook side, helps ensure that the Nook option is here to stay, and for that I am grateful. Even if I could technically just buy books from the Kindle store and break DRM - that is simply not an elegant solution. I love my NST and don't want to see support, book sales, and their brand of hardware innovation disappear - lest we forget, the idea for the 7" media tablet was first put to the test on a grand scale by them, and they were also first to market with a sidelit touchscreen eInk-based reader. Beyond that - a little competition is a good thing.

What did B&N had on MS that was worth $300M? As long as I know MS was the one suing, in the worst case for them, they were going to lose and nothing more. Were their patents on danger of being invalidated?

They turned a patent case that could have turned into just another licensing deal into a foot in the door into the publishing industry in a PARTNERSHIP that promotes competition. Everyone misses the fact that Microsoft is doing everything it can to build synergistic relationships which are better for everyone including customers including people who hate MS and don't use B&N's device or services. Simply because MS' actions are going to create stronger competition for apple and amazon everyone benefits.I hate the way people want to jump onto this negativity bandwagon.

Ask yourself why has B&N been the only company that didn't settle the patents case out of court? Samsung is a big company that would have had no problem putting up the legal fees if they saw it being winnable. They settled for what 15$ for every device!!! Would they have done that if it was a legal case they could have won?

No. Fenris is on to something. Also Samsung may be paying $5-10 per device not $15. No one is going to win against FAT and VFAT (long file names!) but B&N didn't want to pay up.

MS paid 300million but is getting some of it back as royalties and they received 17% of the business valuing the business (B&N and the NewCo subsidiary) at 1.7 Billion. B&N stock was valuing the company at 900M at the time and has since has jumped to 1.3B. That still leaves a shortfall of 400M in the valuation. I think that MS is paying more for a lower percentage because it is going to get a significant minority of it back through Windows8/WP8 software support and royalties. So MS gets what it wants in terms of royalties and apps for it's beleaguered OS.

B&N gets cash to get its business off the ground in International markets and grow it.

I guess they skirted around B&N's refusal to pay them royalties for bogus android patents...

Bogus, and yet a preliminary ruling went against B&N, and every other maker (save Motorola) has cross-licensed. Seems there are very few people who aren't "The Internet" who thinks they're clearly bogus...

You forget that things went EXTREMELY well for B&N as all but one of the patents MS was asserting were tossed. B&N was also looking to fight the one left. MS, once again, bought off Justice. They basically payed B&N to settle and get added to the list of those "Who have recognized out IP claims BS". As to why the others settled, most have to work with MS and if MS starts playing games with their products or support, it would hurt them way more than paying the MS extortion racket. This is why the DoJ used to actually enforce anti-trust law, monopolies can get away with all kinds of crap. MS is clearly doing just that in this endeavor.

I'm surprised the Nook business is worth over 1.5b. This should serve as a nice example for other Android vendors being sued by MSFT; just ignore MSFT and eventually they will throw money at you to settle.

Quote:

Companies Microsoft cooperates with seem to have a severly shortened life expectancy

Apple and Facebook say hi.

LMAO, partnering with MS did hurt Apple badly. It was only when Apple went into areas without partnering with MS; ipod, iphone, ipad, etc. that they have become the beast they are now. MS did give Apple a boost, after they had almost destroyed them, by committing to the platform when Apple was at its lowest. MS did this to avoid a lot of anti-trust penalties and it worked. MS has been able to continue to act in ways that were deemed anti-competitive in the anti-trust action due to their "support" of Apple.

The giant wakes up from his slumber and opens one eye. He suddenly sees everyone reading from slim smart devices. "Me too!" he thinks, and grabs the first ebook seller that is within reach. "Nice!" the giant rumbles, and falls asleep again, crushing his new toy under his enormous weight.

The giant wakes up from his slumber and opens one eye. He suddenly sees everyone reading from slim smart devices. "Me too!" he thinks, and grabs the first ebook seller that is within reach. "Nice!" the giant rumbles, and falls asleep again, crushing his new toy under his enormous weight.

The giant wakes up from his slumber and opens one eye. He suddenly sees everyone reading from slim smart devices. "Me too!" he thinks, and grabs the first ebook seller that is within reach. "Nice!" the giant rumbles, and falls asleep again, crushing his new toy under his enormous weight.

6/10 troll attempt.

It was a bit bombastic, but I actually agree with the sentiment. Microsoft is an inefficient corporate behemoth that seems, in my opinion, incapable of innovation with respect to mobile devices. I am concerned when they make forays into these arenas, especially those that I have a stake in such as the Nook. There is a whiff of "Me too!" when MS makes these decisions.

I'm really confused. Microsoft has been suing Barnes & Noble for infringing on their patents for shipping an Android tablet. Microsoft claims that the Linux kernel infringes on tons of their patents, but Microsoft won't go after any company that can afford to fight back in court because these are pretty baseless claims. But they've leaned on TomTom and Barnes & Noble.

Barnes & Noble have basically called Microsoft the devil.

I find it hard to believe Microsoft is really supporting an Android tablet. I suspect Microsoft went to a struggling company and said "Borders just went under and you can't compete with Amazon. We'll drop the lawsuit and infuse you with cash if you abandon Android and make your next tablet based on Windows 8."

They strong-armed the cash-strapped Nokia with a similar deal to get them to abandon Linux as a mobile platform. It is a shame Microsoft can't compete in the mobile market on the strength of their OS and has to resort to these tactics.

Seems like a win-win. Why do some here believe the next Nooks will abandon Android? That doesn't seem to be part of the deal. Microsoft gets a prime e-reader app for their Win 8 tablets (which are still vaporware), ends litigation (which isn't cheap!), and gets future royalties.

Microsoft has taken some gambles with this. As mentioned, Nokia is in dire straights, partnering with Microsoft has given them media attention and an actual product to release, plus a chance to be more than just another Palm/HP/whoever trying to compete in a Google/Apple dominated world with yet another linux based OS. People will probably blame Yahoo dying on their partnership with Microsoft, but in reality Yahoo is screwing themselves.

This is a pretty good partnership for B&N. There's a huge opportunity to take the fight to Amazon here and they need capital to do it. Same reason Indigo in Canada recently sold off Kobo, they sold it for more than the market cap of their entire company at the time and it was likely their best path forward, but it's hard to compete in that kind of market. Now the price has been slashed and hopefully it'll be a big product everywhere.